Industry + Work | 1970 | Sound | B/W
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Issues of money and economics 1970's
Victoria St London Westminster Abbey seen to the left of centre. Woman is seen crossing the road left to right. Man on far side of road walks into a branch of Midland Bank. Seeks information from the door man and is pointed in the right direction. Close up of white middle aged man in dark suit white shirt and dark tie seated behind desk looks up as door is knocked. First man enters and takes seat facing man on other side of desk both men discuss first man's loan request. Second man states the banking history of the first man's firm is good and the loan has been agreed but also seeks personal guarantee from the first man passes terms of guarantee to first man who reads them and agrees, he asks what is the interest rate that will apply two percent above base rates six and one half percent. First man inquires about repayment plan he is informed that the bank will examine his firms balance sheet in twelve months time and look at it then.
Voice over informs that the first man is Dave Croome a lecturer at London University and the viewer has just seen him play the part of a bank customer to introduce this programme on the money supply.
Picture changes to a bar chart explaining the movements of the loan between the bank and the imaginary firm using their respective balance sheets to illustrate the movements of the £2000 loan. The diagram explains how the loan can be seen as an asset for the firm and a liability to the firm, similarly the voice over shows how it is both an asset and a liability to the bank.
The paying of the money by the firm to a third party has no effect as the money remains in the system. Thus the money supply has increased by £2000.
Dave Croome is seen leaning against a bank counter and recaps the him obtaining a loan can be viewed as an increased bank deposit and thus an increase in the money supply, creating bank loans and charging interest would appear to be a very profitable enterprise so why don't banks do this indefinitely he asks, to obtain the answer he seeks the views of a Mr Cox who is a group treasurer with a London clearing bank. Mr Cox is seen wearing a dark suit and tie with a white shirt. Croome and Cox discuss the reasons why banks do not simply do this and increase the money supply. Cox argues that there are constraints on banks from doing this, there must be a demand for loans, banks have to maintain a certain proportion of its assets with the Bank of England twelve and a half percent is a statutory requirement plus a bit more as a safety cushion. Another bar diagram is shown to express the distribution of the bank's liabilities and assets, banks seek to balance deposit liabilities with distribution of assets. Cox's bank's deposits are nearly all repayable on demand or very short term notice, thus some assets are kept as cash next after cash in the liquidity stakes are liquid assets which can be turned into cash very quickly, next come investments mainly in UK Government stocks and finally advances a bar graph depicts the way that assets equal liabilities.
The two men discuss the effects that the reserve Asset Supply has on deposit expansion Cox explains and gives the figures for the banking systems reserve assets as at October 1971, he then explains what the balance at the bank of England is used for to clear inter bank debt.
Coomes inquires about the effects of external drains on the operations of the bank, Cox explains how that can happen and how via this the central bank can control credit supply. Coombe's moves the discussion to the role of the old lady of threadneedle street in open market operations. A bar diagram is used to show the bank of England's effect by buying and selling bonds this leads Coombe's and Cox to discuss the Discount Houses, Coombe's then informs the viewer he is to interview Mr Bullard the Chairman of a leading London Discount House. Bullard is white late forties early fifties he wears a dark suit and tie and a white shirt, Bullard explains the role the discount houses play in lending to government and borrowing from high street banks. They discuss the bank of England's methods of controlling the money supply they use treasury bills to illustrate their discussion buying treasury bills by the bank decreases the money supply whilst selling has the opposite effect this action also has the effect of effecting the price of money the interest rates.
Coombe's now has an interview with Andrew Crockett from the bank of England. Crocket is white late thirties early forties he has a dark suit and tie with a white shirt they sit on tubular and leather chairs facing each other with no table between themselves, Crockett outlines the role of the bank of England in relation to both the clearing banks and the government Coombe's turns the discussion to the money supply he wants to know what is the best economic indicator for the economy interest rates or the amount of money being borrowed Crockett says that the bank of England approach the problem differently if the percentage change in the money supply is equal to the percentage change in Gross Domestic Policy then the bank can be said to have a neutral policy, if the percentage change in the money supply is greater than the percentage change in GDP then the bank's policy can be viewed as lax and thus vice versa. Crockett also explains the that the bank can effect the money supply by effecting interest rates the general rule being as they rise the money supply falls its tools to achieve this are open market operations and altering bank rate.
Coombe's is shown back in the midland bank and gives a synopsis of what the programme covered.
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